FedEx tumbles after sober results, broader market slips
By Shivansh Tiwary
(Reuters) -Shares of FedEx (NYSE:FDX) sank 11% on Wednesday following dismal results and an outlook that prompted a slew of price-target cuts from Wall Street analysts.
FedEx is seen as a bellwether for worldwide economic trade. Investors on Wednesday focused on the specific problems at the global delivery giant that disappointed Wall Street, particularly its Express delivery business, though the broader market fell late in the session.
«While it may be easy to blame this on the cycle/macro, we disagree,» wrote analysts at Morgan Stanley.
Quarterly operating income for the air-based Express unit fell 60%, hit by volatile macroeconomic conditions, muted retailer restocking and reduced demand from its largest customer, the U.S. Postal Service (USPS). The U.S. Post Office has been diverting more packages from higher-margin air services to ground services.
The drop in Express earnings surprised analysts, who had anticipated cost-cutting initiatives announced earlier in the year would offset some of the decline in business from USPS.
«FedEx's quarterly results are a step back,» Deutsche Bank analyst Amit Malhotra said.
The stock was down $32 a share at $248.02, while shares of rival UPS fell 1.7%.
The broader S&P 500 index was down 0.9% after a steady run that has left it just shy of an all-time record built on falling interest rates. In September 2022, a FedEx warning sparked a selloff in equities that lasted several weeks, but the market has been more optimistic of late.
The U.S. Federal Reserve and other world central banks have hiked rates sharply over the past year-plus to combat inflation, but some, including the Fed, have recently pivoted, and are now suggesting rate cuts will be in the offing
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